KYC – CDD

Anti Money Laundering and CDD/KYC Policy

 

The following revised policy of Anti-Money Laundering and Counter Terrorism Financing is approved by board of directors of AAA Securities (Private) Limited  as on 13th November 2018.

 

It is the Policy of AAA Securities (Private) Limited that:

 

• Regulatory obligations to prevent money laundering are met in full.
• Positive management action will be exercised in order to minimize the risk of the Brokerage

House’s services being abused for the purposes of laundering funds associated with drug trafficking, terrorism or any other serious crime. For this purpose, three lines of defense will be created to combat Money Laundering and Terrorism Financing.

 

1. The front office dealing with account opening, trading, and accounts office maintaining and communicating daily transactions to clients will be provided with sufficient resources and training to observe and raise flags for any suspicious transactions.
2. The Compliance Officer will be authorized in letter and spirit to implement and oversee current AML/CFT policy measures and suggest new measures or amendments in current policy to effectively combat Money Laundering and Terrorism Financing.
3. Internal Audit will be conducted on yearly basis by Compliance Officer and presented to the internal audit committee.

• AAA Securities (Private) Limited will develop comprehensive Risk Based Approach for the brokerage house to combat Money Laundering and Terrorism Financing. Risk exposure to overall business and investment profile of clients will be maintained and updated periodically.
• The process of layering money is more relevant to brokerage houses than any other stage of money laundering. To identify the process of layering requires staff training and confidence to raise red flags regarding customers investment behavior and transactions. AAA Securities (Private) Limited will periodically conduct internal training of the staff through Compliance Officer. External training for compliance officer, senior management, and staff will also be conducted for capacity building to combat ML/TF.
• The Brokerage House will not continue established relationships with customers whose conduct gives rise to suspicion of involvement with illegal activities.
• Any customer relationship where the customer’s conduct gives the Brokerage House reasonable cause to believe or suspect involvement with illegal activities will be reported by the Compliance Officer or senior management to the FMU and SECP after proper scrutiny / enquiry. Thereafter, action will be undertaken in conjunction with the law enforcement agencies to avoid any risk of the Brokerage House committing a tipping-off offence. Wherever possible, the relationship will be terminated.
• That the identities of all persons conducting business with the Brokerage House are properly verified and sufficient information gathered and recorded to permit the Brokerage House to “know its customer” and predict the expected pattern of business.
• Prospective business where all the required information cannot be obtained without a justifiable reason is declined.
• Potential new relationships that do not appear to be legitimate are declined.
• Transactions offered by equity account holders do not appear legitimate are declined.
• Established relationships are regularly monitored, to ensure that they fit the customer’s profile, especially in respect of large or abnormal transactions.

Records are retained to provide an audit trail and adequate evidence to the law enforcement agencies in their investigations.

• Followings are in detail policy measures needed to be implemented by AAA Securities (Private) Limited to reduce and mitigate remaining risk for ML/FT through the brokerage house:

 

BUSINESS RISK:

 

• Currently, AAA Securities (Private) Limited only provides services through trading of eligible listed Securities in Ready Market and Future Market. The brokerage house does not deal in commodities, precious metals, margin financing, mutual funds, or any other instruments. Layering of money through securities in ready and future market is relatively low risk when compared with precious metals or margin financing. Trading in these two products also allows the staff to perform monitoring and ongoing due diligence with relative ease. No new product will be introduced without prior approval of the senior management of  AAA Securities (Private) Limited. A new product will require reassessment of AML/CFT policies and identification of specific risks associated with any such product.
• All transactions will be registered through Pakistan Stock Exchange and in house transactions are allowed. All equities will move through Central Depository Company and all money transactions will be done through banks.

• AAA Securities (Private) Limited will discourage any cash transactions from the clients.
• AAA Securities (Private) Limited will report to exchange any cash transaction exceeding the amount of 20,000 rupees. No cash transaction above 750,000 rupees will be allowed even in emergency situations. All cash transactions above 20,000 rupees will require prior approval of the senior management. All online transactions should be deposited by the client him/herself with his/her signatures on the receipts. • No individual or company of foreign origin will be provided services through AAA Securities (Private) Limited. Any changes in this policy will require reassessment of AML/CFT policy and risk assessment. Nonresident Pakistanis will be provided services with proper documentation and risk assessment.

• Clients can only transfer funds or deposit cheques originated from banks inside of Pakistan. No foreign transactions will be allowed even by non-resident Pakistanis.
• These above policy measures are taken to reduce the overall business risk exposed to Money Laundering and Terrorism Financing.
• The residual risk will be mitigated by completing Know Your Customer profiles and Customer Risk profiles. KYC policy is already approved and deployed by AAA Securities (Private) Limited. Customer Investment profiles should also be created to mitigate risk of ML/TF.

 

CUSTOMER RISK PROFILES:

• Customer Risk Profile for every customer will be developed and monitored throughout the lifetime of the business relationship.
• All customers will be categorized as “Customer Types” based on their source of income and each customer will be assigned a “Risk Category”.
• All customers defined as High Risk will require prior approval of the senior management before initiating a business relationship. AAA Securities (Private) Limited
• Categories of customers can be changed from Low to Medium or from Medium to High. Any downward revision of customer risk category will require prior approval from senior management upon recommendation of Compliance Officer

. • Following are few examples of customer risk profiles that will be categorized as High Risk. This list is not exhaustive in nature and compliance officer should recommend High Risk category based upon his judgement.

o The business relationship is conducted in unusual circumstances (e.g. significant unexplained geographic distance between the RP and the customer).

o Non-resident customers. o Legal persons or arrangements.

o Companies that have nominee shareholders.

o Business that is cash-intensive.

o The ownership structure of the customer appears unusual or excessively complex given the nature of the customer’s business such as having many layers of shares registered in the name of other legal persons.

o Politically exposed persons

o Shell companies, especially in cases where there is foreign ownership which is spread across jurisdictions.

o Trusts and other legal arrangements which enable a separation of legal ownership and beneficial ownership of assets.

o Requested/Applied quantum of business does not match with the profile/particulars of client. o Real estate dealers, dealers in precious metal and stones, and lawyers/notaries.

• Since Pakistan is on place on Grey List by FATF, further diligence is required by employees, compliance officer, and senior management of AAA Securities (Private) Limited to maintain vigilance against ML/FT.
• Anonymous transactions and Non-Face-to-Face business relationships will not be allowed or established.
• All clients should physical visit Falki Capital registered office before an account can be opened.
• Third party payments or payments from outside of Pakistan will not be allowed.

3. Politically Exposed Persons (PEPs)

 

Politically Exposed Persons are the individuals holding important public positions and persons or companies clearly related to them may expose AAA Securities (Private) Limited to significant reputational and legal risk. We will define PEPs as: heads of state, ministers, influential public officials, judges and military commanders and includes their family members and close associates. Financial services to corrupt PEPs expose AAA Securities (Private) Limited to reputational risk so it should be vigilant in business relationship with PEPs. AAA Securities (Private) Limited should preform additional EDD before opening an account and ODD after establishing business relationships. Following guidelines and procedures should be followed before opening accounts PEPs.

3.1.Obtain approval of senior management for such customers

3.2.Take reasonable measures to establish the source of wealth and source of funds

3.3.All sources of funds and wealth documents should be attested.

3.4.Any other family members trading through Falki capital should be declared Falki Capital AML/CFT Policy

3.5.No payments will be made outside of Pakistan on request of PEP

3.6.PEP can give maximum of three bank accounts to do business with Falki capital

3.7.No cash transactions above Rs. 20,000 will be allowed by PEP

3.8.CO will perform ODD of PEPs every Quarter

3.9.Internal Audit should PEPs transactions on yearly bases

Management approval must be required to continue a business relationship once a customer or beneficial owner is found to be, or subsequently becomes, PEP. AAA Securities (Private) Limited should determine the nature and extent of EDD where the ML/TF risks are high and consider these factors such as whether the customer who is PEP

• Has prominent public function in sectors known to be exposed to corruption.
• Has business interest that can cause conflict of interests (with the position held). The other red flags that the AAA Securities (Private) Limited should consider includes (in addition to the above and that they considered for other applicants)
• The information that is provided by the PEP is inconsistent with other (publicly available) information, such as asset declarations and published official tax returns
• PEP insists payment in different bank accounts for no apparent commercial reasons.
• The PEP is prohibited or restricted by law from holding accounts or owning certain property. AAA Securities (Private) Limited should determine whether to continue considering a customer as PEP who is no longer PEP. The factors to consider include;

3.10. The level of (informal) influence that the individual could still exercise; and

3.11. Whether the individual’s previous and current function are linked in any way with same intensity in substantive matters.

 

4. HIGH NETWORTH INDIVIDUALS:

 

AAA Securities (Private) Limited should define any individual investing more than 50,000,000 Rupees as High Net-worth Individual. For all the High Net-worth Individuals following procedures should be adopted:

4.1.Prior approval of Senior Management before establishing business relationship.

4.2.Enhanced Due Diligence shall be applicable for all High Net-worth Individuals.

4.3.Monitoring of individuals who might cross the threshold of 30 million rupees and become high net worth.

AAA Securities (Private) Limited should not discourage High Net-worth Individuals from investing but proper due diligence is necessary to mitigate the risks related to ML/FT.

 

5.Customer Due Diligence (CDD)

 

Staff in the Front Office should prudently ensure that all the necessary documents have been obtained at the time of account opening. The Brokerage House has a statutory obligation to know its customers. This applies to every type of customer regardless of who they are, their personal status, or the type of account or service that they require. Knowing your customer means:

• Seeking evidence of identity and address and independently confirming that evidence at the start of a business relationship.
• Seeking information regarding the nature of the business that the customer expects to conduct with the Brokerage House, establishing sources of income and expected patterns of transactions, and keeping that information up to date, to show what might be regarded as normal activity for that customer

. All prospective customers for accounts with AAA Securities (Private) Limited must be seen face to face. The appropriate account opening and customer information forms must be completed and any additional interview notes must be obtained and retained on the customer file.

 

CUSTOMER IDENTIFICATION – GENERAL PRINCIPLES

 

5.1.The Need to Verify Identity and Address The Brokerage House must verify the credentials of every customer when an account is first opened. This applies to all types of accounts (personal customers; sole traders; partnerships; private and public companies etc.).

5.2.Completion of Account Opening and Know Your Customer Forms All prospective account holders must complete in full the Account Opening Form and provide the necessary documentary evidence of identity and financial information. If any column on either form is not applicable it should be marked as N/A, no section should be left blank. The introducer must also complete and sign the ”Account Opening and “Know Your Customer” form. Any additional information obtained during the interview about the customer’s background and financial standing should be recorded by and kept in customer’s file.

5.3.Completion of Account Opening Formalities and Authorization No account will be opened until the account opening and Know Your Customer forms have been completed and all documents have been received and examined to ensure that they are valid. For example:

o the ID card is not expired;

o the documents are duly attested;

and o all documentary evidence, information and signatures are consistent

Establishing the identity of anyone who wishes to do business with the Brokerage House is vital. For all applicants the Brokerage House is required to be satisfied that:

5.4.the person we are dealing with is who she/he says they are and lives permanently at the address

5.5.they have given; the sole trader, partnership, company we are dealing with is a legitimate business with a known address and represents legitimate owners.

5.6.Therefore, in respect of accounts for sole traders, partnerships and companies, it is necessary to verify the identity of the business entity PLUS the key individuals who will be operating the account as well as those who are investing into the business or controlling it.

5.7.For joint accounts, the identity of all account holders must be established. This also applies to any other third parties, who are permitted by the account holder to operate the account. If the customer gives a mandate to a third party to operate the account, in such cases the identity of both the account holder and third party should be obtained in line with the normal procedures set out above for personal customers. In addition to the above policy measures, the following policy measures should be adopted before and during the course of business relationship with clients.

5.8 AAA Securities (Private) Limited will not open or maintain anonymous account or an account with fictitious names.

5.9 AAA Securities (Private) Limited will apply CDD measures when establishing business relationship with a client and when there is doubt about the veracity or adequacy of previously obtained customer identification data.

5.10. Customer due diligence (CDD) In broader term includes:

1. a) Identifying the client or beneficial owner and verifying the client’s/ beneficial owner’s identity on the basis of attested documents, data or information obtained from customer and/or from reliable and independent sources.
2. b) Understanding and as appropriate, obtaining information on the purpose and intended nature of the business relationship, and
3. c) Monitoring of accounts/transactions on ongoing basis to ensure that the transactions being conducted are consistent with the AAA Securities (Private) Limited’s knowledge of the customer, the customer’s business and risk profile, including, the source of funds and updating records and data/information to take prompt action when there is material departure from usual and expected activity through regular matching with information already available with AAA Securities(private) Limited
4. d) File a Suspicious Transaction Reporting (“STR”) with The FMU, in accordance with the requirements under the law after the approval of senior Management

 

5.11. AAA Securities (Private) Limited should monitor transactions to determine whether they are linked. Transactions could be deliberately restructured into two or more transactions of smaller values to avoid the applicable threshold

5.12. AAA Securities (Private) Limited should obtain and verify the identification of a client from attested documents, data or information including verification of CNICs as and when required from different types of client.

5.13. AAA Securities (Private) Limited should verify the identity of the client and beneficial owner before the course of establishing a business relationship

5.14. AAA Securities (Private) Limited should determine whether the person is acting on behalf of a client (“Authorized person”) and should take reasonable steps to obtain

1. a) Evidence to determine authority of such person to act on behalf of the client, which shall be verified through documentary evidence including specimen signature of the client
2. b) Identification and verification of the person purporting to act on behalf of the client
3. c) Identification and verification of the Client

5.15. While performing CDD measure in relation to client that are legal persons or legal arrangements AAA Securities (Private) Limited should identify and verify the identity of the client, and understand the nature, ownership and control structure of its business

5.16. Each customer shall be categorized as high, medium or low risk, depending upon the outcome of the CDD process

5.17. Compliance officer will maintain a list of all such Clients/ Accounts where the business relationship was refused or needed to be closed on account of negative verification

5.18. For existing accounts Compliance Officer will complete verification after establishment of the business relationship, provided that. a) This occurs as soon as reasonably practicable b) This does not interrupt the normal conduct of business c) The ML/TF risks are effectively managed

5.19. AAA Securities (Private) Limited should apply CDD requirement to its existing Client on the basis of materiality and risk and should conduct due diligence on existing relations at appropriate time, taking into account whether and when CDD measures have previously been undertaken and the adequacy of data obtained.

5.20. If AAA Securities (Private) Limited not able to satisfactorily complete required CDD measures, account shall not be opened or any service provided and consideration shall be given if the circumstance are suspicious so as to warrant the filling of an STR and where CDD of existing Client is found unsatisfactory, the relationship should be treated as high risk and reporting of suspicious Transaction be considered In accordance with regulations

5.21. Where AAA Securities (Private) Limited forms a suspicion of ML/TF, and it reasonably believes that performing the CDD process will be tip-off the customer, it may not pursue the CDD process, and instead should file an STR in accordance with regulations.

5.22. Government Entities accounts shall not be opened in the personal name of the government officials and account which is to be operated by an officer of the Federal or Provincial or Local Govt. in his/her official capacity, shall be opened only on production of a special resolution or authority from the concerned administrative Dept. or ministry duly endorsed by the Ministry of Finance or Finance Dept./Division of the concerned Govt. and AAA Securities (Private) Limited should also take into account any rules, regulations or procedures prescribed in the governing laws of such entities relating to opening and maintaining of their bank accounts.

 

6. On-going Monitoring of Business Relationship

Once the identification procedures have been completed and the business relationship is established, the AAA Securities (Private) Limited is required to monitor the conduct of the relationship to ensure that it is consistent with the nature of business stated when the relationship/account was opened.

6.1.Compliance Officer will conduct on-going due diligence which includes scrutinizing the transactions every quarter based on customer risk profile and limit assign to his/her account.

6.2.Compliance officer ensure that documents, data or information collected during the “Identification” process are kept up-to-date by intimating the client every year or at least once in two years or when required by undertaking routine reviews of existing records.

6.3.Compliance Officer will consider updating client CDD records as a part of its periodic reviews or on the occurrence of a triggering event, whichever is earlier. Following are the triggering events

1. Material changes to the client risk profile or changes to the way that the account usually operates
2. Where it comes to the attention of the CO that it lacks sufficient or significant information on that particular client

iii. Where a significant transaction takes place

1. Where there is a significant change in client documentations standards
2. Significant changes in the business relationship

6.4.CO should be vigilant for any significant changes or inconsistencies in the pattern of transactions. Inconsistency is measured against the stated original purpose of the accounts. Possible areas to monitor could be: i. Transaction Type ii. Frequency iii. Amount iv. Geographical origin/ destination v. Account signatories

6.5.However, if CO has a suspicion of ML/TF or becomes aware at any time that it lacks sufficient information about an existing client, it should take steps to ensure that all relevant information is obtained ASAP.

 

7. Simplified Due Diligence Measures (“SDD”)

 

7.1.CO can conduct SDD in case of lower risks identified. AAA Securities (Private) Limited will ensure that the low risks it identifies are commensurate with the low risks identified by the country or the SECP. While determining whether to apply SDD, AAA Securities (Private) Limited should pay attention to the level of risk assigned to the relevant sector, type of client or activity.

7.2.The simplified measures should be commensurate with the low risk factors. SDD is not acceptable in higher-risk scenarios where there is an increased risk, or suspicion that the applicant is engaged in ML/TF, or the applicant is acting on behalf of a person the that is engaged in ML/TF

7.3.Where AAA Securities (Private) Limited decides to take SDD measures on an applicant/Client, it should be documented the full rational behind such decision

 

8. Enhanced CDD Measures (“EDD”)

 

8.1.CO will examine, as far as reasonably possible, the background and purpose of all complex, transactions of five million or more, and all unusual patterns of transactions, that have no apparent economic or lawful purpose.

8.2.Where the risks of ML/TF are higher, or in cases of unusual or suspicious activity, CO will conduct enhanced CDD measures, consistent with the risks identified. AAA Securities (Private) Limited should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious

8.3.Following enhanced CDD measures that should be applied for high-risk business relationships include:

1. a) Obtaining additional information on the applicant/customer (e.g. occupation, volume of assets, information available through public databases, internet, etc.).
2. b) Updating more regularly the identification data of applicant/customer and beneficial owner.
3. c) Obtaining additional information on the intended nature of the business relationship
4. d) Obtaining additional information on the source of funds or source of wealth of the applicant/customer

. e) Obtaining additional information on the reasons for intended or performed transactions.

1. f) Obtaining the approval of senior management to commence or continue the business relationship

. g) Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

8.4.In case of accounts where the accountholder has instructed the AAA Securities (Private) Limited not to issue any correspondence to the accountholder’s address. AAA Securities (Private) Limited should exercise due caution as a result. “Hold Mail” accounts should be regularly monitored and reviewed and take necessary steps to obtain the identity of the account holder..

 

9. Record-Keeping Procedures

 

AAA Securities (Private) Limited will ensure that all information obtained in the context of CDD is properly recorded. This includes both;

1. a) Recording of the documents when verifying the identity of the client or the beneficial owner, and
2. b) Transcription into the AAA Securities (Private) Limited owns IT systems of the relevant CDD information contained in such documents or obtained by other means.

9.1.AAA Securities (Private) Limited will maintain record, for at least 5 years after termination of a client and necessary records should be available when information requests from the competent authorities. Such records should be sufficient to permit the reconstruction of individual transactions, so as to provide, if necessary, evidence for prosecution of criminal activity.

9.2.Where there has been a report of a suspicious activity or the AAA Securities (Private) Limited is aware of a continuing investigation or litigation into ML/TF relating to a client or a transaction, records relating to the transaction or the client will be retained until confirmation is received that the matter has been concluded.

9.3. AAA Securities (Private) Limited will also keep records of identification data obtained through the customer due diligence process, account files and business correspondence that would be useful to an investigation for a period of 5 years after the business relationship has ended. This includes records pertaining to enquiries about complex, unusual large transactions, and unusual patterns of transactions. Identification data and transaction records should be made available to relevant competent authorities upon request.

9.4.Beneficial ownership record will be maintained for at least 5 years after the date on which the client (a legal entity) is dissolved or otherwise ceases to exist, or five years after the date on which the client ceases to be a client of the AAA Securities (Private) Limited

9.5.Records relating to verification of identity will generally comprise:

1. a) All the attested documents received relating to the identity of the client;
2. b) The evidence itself or a copy of it or, if that is not readily available, information reasonably enough to obtain such a copy.

9.6.Records relating to transactions will generally comprise: Details of personal identity, including the names and addresses, of:

• the customer;
• the beneficial owner of the account or product; and
• Any counter-party Details of securities and investments transacted including:
• the nature of such securities/investments • valuation(s) and price(s);
• memoranda of purchase and sale; • source(s) and volume of funds and securities; • destination(s) of funds and securities;
• memoranda of instruction(s) and authority(ies);
• book entries; • custody of title documentation;
• the nature of the transaction;
• the date of the transaction;
• the form (e.g. cash, cheque) in which funds are offered and paid out

 

10. Reporting of Suspicious Transactions (STRs) / Currency Transaction Report (CTRs)

 

AAA Securities (Private) Limited will comply with the provisions of AML Act and Rules, regulations and directive issued there under for STRs/CTRs in the context of ML/TF that consist of:

1. a) Suspicious activity that is inconsistent with a client’s known,
2. b) Where a transaction is inconsistent in amount, origin, destination, or type with a client’s known, legitimate business or personal activities,
3. c) All complex, unusual large transactions and all unusual patterns of transactions their background, which have no apparent economic or visible lawful purpose.

10.1. Enquiries conducted by the Compliance officer and satisfactory explanation of the transaction not provided by the client, it may be concluded that there are grounds for suspicion requiring disclosure and escalate matters to the AML/CFT

10.2. CO will do further enquiry of all such transactions falling into one or more of the following categories:

1. Any unusual financial activity of the customer in the context of the customer’s own usual activities;
2. Any unusual transaction in the course of some usual financial activity;
3. Any unusually-linked transactions;
4. Any unusual method of settlement;
5. Any unusual or disadvantageous early redemption of an investment product;
6. Any unwillingness to provide the information requested.

10.3. Where cash transactions are being proposed by client, and such requests are not in accordance with the client’s known reasonable practice, CO will need to approach such situations with caution and make further relevant enquiries.

10.4. AAA Securities (Private) Limited not allow the cash transactions over to 20,000 Rupees and any one-time cash transaction above 20,000 is reported to Pakistan Stock Exchange.

10.5. AAA Securities (Private) Limited should note that STRs, including attempted transactions, should be reported regardless of the amount of the transactions; and, the CRTs should be reported for the transactions of Rs. 2 million and above as per requirements of AML Act to FMU without any delay

10.6. AAA Securities (Private) Limited will report total number of STRs filed to the Commission on bi- annual basis within seven days of close of each half year. The CO should ensure prompt reporting in this regard.

10.7. Vigilance systems should require the maintenance of a register of all reports made to the FMU. Such registers should contain details of:

1. The date of the report;
2. The person who made the report;
3. The person(s) to whom the report was forwarded; and
4. Reference by which supporting evidence is identifiable.

10.8. AAA Securities (Private) Limited turn away business that they suspect might be criminal in intent or origin. Where an applicant or a customer is hesitant/fails to provide adequate documentation (including the identity of any beneficial owners or controllers), consideration should be given to filing a STR. Also, where an attempted transaction gives rise to knowledge or suspicion of ML/TF, that attempted transaction should be reported to the FMU.

10.9. Once suspicion has been raised in relation to an account or relationship, in addition to reporting the suspicious activity AAA Securities (Private) Limited will ensure that appropriate action is taken to adequately mitigate the risk of the AAA Securities (Private) Limited that being used for criminal activities. This may include a review of either the risk classification of the customer or account or of the entire relationship itself

 

REPORTING PROCEDURES FOR STAFF AND MANAGEMENT

 

All suspicions must be reported in accordance with the annexed forms. Once a report has been made, all personal legal obligations have been met. All reports submitted are treated in the strictest confidence. The customer is never informed and to do so would be a criminal offence. It is important that the reason for the suspicion is explained fully. It is of critical importance that such suspicions must not be discussed with anyone outside the Brokerage House. Care must be taken in discussing a suspicion, even with other colleagues, and if this is considered not to be appropriate, then discussion must only be held with senior management. It is vital that no mention of such suspicion is made to the customer. Any discussion of this nature would risk a tipping off offence being committed, if the customer became aware that a report had been submitted. All staff must note that once the reporting process has commenced, it must be followed through and completed, even if the original suspicion might appear to have been resolved. The Compliance Head or senior management will examine all reports and make additional enquiries as deemed appropriate. If also suspicious, the Compliance Head or CEO will subsequent to management review forward to the Regulator. This procedure must be followed and repeated every time there is an unusual transaction, even if the Brokerage House has already notified Regulator of previous unusual transactions relating to that customer/account. All reports will be retained for reference purposes whether or not the transaction is reported to Regulator.

 

11. Sanctions Compliance- Implementation of UN Security Council Resolutions

 

Sanctions are prohibitions and restrictions put in place with the aim of maintaining or restoring international peace and security. They generally target specific individuals or entities; or particular sectors, industries or interests. They may be aimed at certain people and targets in a particular country or territory, or some organization or element within them. There are also sanctions that target those persons and organizations involved in terrorism.

11.1. AAA Securities (Private) Limited will not to form business relationship with the individuals/entities and their associates that are either, sanctioned under United Nations Security Council (UNSC) Resolutions adopted by Pakistan or proscribed under the Anti-Terrorism Act, 1997.

11.2. The UNSC, acting under chapter VII of the United Nations Charter, adopts the Resolutions on counter terrorism measures and proliferation of WMD, in particular;

11.3. the UNSC Resolution 1267 (1999), 1989 (2011), 2253 (2015) and other subsequent resolutions, which impose sanctions covering; asset freeze, travel ban and arms embargo, against individuals and entities associated to Al-Qaida, Taliban, and the Islamic State in Iraq (Daésh) organizations.

11.4. AAA Securities (Private) Limited will maintain a check. Where clients and transactions are more vulnerable to be involved in TF and PF activities, identify high-risk customers and transactions, and apply enhanced scrutiny. AAA Securities (Private) Limited conduct checks on the names of potential and new customers, as well as regular checks on the names of existing customers, beneficial owners, transactions, and other relevant parties, to determine if the business relations involve any sanctioned person/entity, or person associated with a sanctioned person/entity/country person/entity, or person associated with a sanctioned person/entity/country

11.5. Where there is a true match or suspicion, AAA Securities (Private) Limited takes steps that are required to comply with the sanction’s obligations including immediately–

1. a) Freeze without delay the customer’s fund or block the transaction, if it is an existing customer;
2. b) Reject the customer, if the transaction has not commenced;
3. c) lodge a STR with the FMU; and
4. d) Notify the SECP and the MOFA.

11.6. AAA Securities (Private) Limited will submit a STR when there is an attempted transaction by any of the listed persons.

11.7. CO will document and record all the actions that have been taken to comply with the sanction’s regime, and the rationale for each such action.

11.8 CO to keep track of all the applicable sanctions, and where the sanction lists are updated, shall ensure that existing customers are not listed.

11.9. CO will submit report of mid and end of every month to NCCPL.

 

12. Internal Controls (Audit Function, employee Screening and Training)

 

AAA Securities (Private) Limited will establish and maintain internal control in relation to:

• An audit function to test the AML/CFT systems, policies and procedures.
• Employee screening procedures to ensure high standards when hiring employees; and
• An appropriate employee training program. All measures will and should be taken appropriate to the ML/TF risks.

1. Audit Function

Internal Audit will conduct an AML/CFT audit to independently evaluate the effectiveness of compliance with AML/CFT policies and procedures. The frequency of the audit should be commensurate with the AAA Securities (Private) Limited’s nature, size, complexity, and risks identified during the risk assessments. The AML/CFT audits should be conducted to assess the AML/CFT systems which include:

1. Test the overall integrity and effectiveness of the AML/CFT systems and controls;
2. ii. assess the adequacy of internal policies and procedures in addressing identified risks, including;
   1. CDD measures;
   2.  Record keeping and retention;
   3. Transaction monitoring; (e) Assess compliance with the relevant laws and regulations;
   4. Test transactions in all areas of the AAA Securities (Private) Limited, with emphasis on high–risk areas, products and services;
   5. Assess employees’ knowledge of the laws, regulations, guidance, and policies & procedures and their effectiveness in implementing policies and procedures;
   6. assess the adequacy, accuracy and completeness of training programs;
   7. Assess the effectiveness of compliance oversight and quality control including parameters for automatic alerts (if any), and
   8. Assess the adequacy of the RP’s process of identifying suspicious activity including screening sanctions lists. b. Employee Screening AAA Securities (Private) Limited will ensure that their employees are competent and proper for the discharge of the responsibilities allocated to them. While determining whether an employee is fit and proper, the RP may:
   9. Verify the references provided by the prospective employee at the time of recruitment
   10. Verify the employee’s employment history, professional membership and qualifications
   11. Verify details of any regulatory actions or actions taken by a professional body

Verify details of any criminal convictions; and

Verify whether the employee has any connections with the sanctioned countries or parties.

 

1. Employee Training
2. 1. AAA Securities (Private) Limited will ensure that all appropriate staff, receive training on ML/TF prevention on a regular basis, ensure all staff fully understands the procedures and their importance, and ensure that they fully understand that they will be committing criminal offences if they contravene the provisions of the legislation.
3. Training to staff should be provided at least annually, or more frequently where there are changes to the applicable legal or regulatory requirements or where there are significant changes to the AAA Securities (Private) Limited ‘s business operations or client base.

ALL EMPLOYEES ARE RESPONSIBLE FOR:

 

• Remaining vigilant to the possibility of the money laundering

. • Complying fully with all the anti-money laundering procedures in respect of customer identification, account monitoring, record keeping and reporting.

• Reporting all suspicions of money laundering to the Compliance Head or CEO.
• Promptly completing, every year, “Annual Acknowledgement Form for the Prevention of Money Laundering confirming that they had no suspicions during the prior year or that any suspicions have been reported and acknowledging that they have re-read AML/CFT Employee Handbook.
• Employees who violate any of the anti-money laundering regulations or the policies and procedures outlined in AML/CFT Employee Handbook will be subject to disciplinary action.

 

13. Warning Signs and Red Flags

 

1. Customers who are unknown to the broker and verification of identity / incorporation proves difficult.
2. Customers who wish to deal on a large scale but are completely unknown to the broker.
3. Customers who wish to invest or settle using cash.
4. Customers who use a cheque that has been drawn on an account other than their own.
5. Customers who change the settlement details at the last moment.
6. Customers who insist on entering into financial commitments that appear to be considerably beyond their means.
7. Customers who accept relatively uneconomic terms, when with a little effort they could have a much better deal.
8. Customers who have no obvious reason for using the services of the broker (e.g. customers with distant addresses who could find the same service nearer their home base; customers whose requirements are not in the normal pattern of the service provider’s business which could be more easily serviced elsewhere).
9. Customers who refuse to explain why they wish to make an investment that has no obvious purpose.
10. Customers who are introduced by an overseas agent based in a country noted for drug trafficking or distribution.
11. Customers who carry out large numbers of transactions with the same counterparty in small amounts of the same security, each purchased for cash and then sold in one transaction, particularly if the proceeds are also then credited to an account different from the original account.
12. Customer trades frequently, selling at a loss.
13. Customers who constantly pay-in or deposit cash to cover requests for bankers drafts, money transfers or other negotiable and readily marketable money instruments.
14. Customers who wish to maintain several trustee or customers’ accounts which do not appear consistent with the type of business, including transactions which involve nominee names.
15. Any transaction involving an undisclosed party.
16. Transfer of the benefit of an asset to an apparently unrelated third party, or assignment of such benefit as collateral.
17. Significant variation in the pattern of investment without reasonable or acceptable explanation.
18. Transactions appear to be undertaken in a structured, sequential manner in order to avoid transaction monitoring/ reporting thresholds.
19. Transactions involve penny/microcap stocks.
20. Customer requests a securities provider to execute and/or clear a buy order and sell order for the same security or similar or correlated securities (and/or on behalf of the same beneficial owner), in close chronology.
21. Transfers are made to the same person from different individuals or to different persons from the same individual with no reasonable explanation.
22. Unusually large aggregate wire transfers or high volume or frequency of transactions are made with no logical or apparent reason.
23. Customer invests in securities suddenly in large volumes, deviating from previous transactional activity.
24. Customer conducts mirror trades.
25. Customer closes securities transaction before maturity, absent volatile market conditions or other logical or apparent reason.